Here are a few facts we should all be able to agree on:

1. The US has the highest drug prices in the world
2. The US has the highest clinical trial costs in the world
3. American drug R&D is so developed that it subsidizes the rest of the world

The disagreement lies in how these three are connected. If I interpret the Marginal Revolution school of thought correctly, drug prices are high (1) because America subsidizes all R&D (3) while having the highest clinical trial costs (2). So, 3 + 2 → 1 and limiting 1 to make drugs more affordable will lead to a negative feedback loop which would limit 3. This is why people who want to regulate down drug prices are “Supervillains” ⊕ This implies that most drugs approved in the US are (1) life-saving and (2) have no other alternative. My gut reaction, backed by no direct research but some insight in cancer drug effects and mechanism of action, is that this is not the case and that if someone were to perform a rigorous review of approved drugs they would see that most are me-too drugs with marginal benefit. That is not, however, the argument I’m trying to make here which is why it is relegated to the margin. responsible for future deaths of millions of people who won’t be able to benefit from the never-developed drugs.

But of course, if 3 + 2 → 1 were true, there are two more ways to lower 1: limiting the scope of R&D (3) — which wouldn’t be the first time — or, preferably, lowering clinical trial costs (2), which have ballooned out of all proportion thanks to a potent mix of ⊕ To expand on this, on the margin for now and in a separate post later: pre-clinical and phase 1/2 startups get billion-dollar valuations based on but a dream of success, which gets them hundreds of millions of dollars in their accounts, which in turn gets them to spend like drunken sailors on what should be low-single-digit million-dollar trials, which gets you to $>10M phase 1 trial, which borders on clinical trial malpractice. regulatory burden and oodles of money floating around the pharmaceutical/biotech space. The reason for all that money flying around? The promise of high payout guaranteed by unregulated drug prices! So: 1 + 3 → 2.

And if both of those relationships are true, well then there is a positive feedback loop in play, also known as a vicious cycle, and if there is one word that encapsulates the American drug cost landscape “vicious” is better than most.

The problem with high clinical trial costs isn’t only that they serve as an excuse for/lead to high drug prices. They also pose an impossibly high barrier for disconfirmatory trials that could get hastily approved but ultimately ineffective drugs out of the market (see Ending Medical Reversal). Because even in the world of Marginal Revolution’s hyper-accelerated approvals and early access to all, patients and physicians alike would need formal measures of safety and efficacy as a guide, and clinical trials are the ultimate way to do it. So we’d better have a quick-and-dirty way to do those too.

Unless the failure of imagination is mine, and in the Marginal Revolution world it would be an artificial intelligence sifting through “real-world” data for safety and efficacy of the thousands of new medical compounds and procedures blooming in this unregulated Utopia, perhaps even recommended and/or administered by LLMs who would finally bypass those pesky rent-seeking doctors. You have to see item number 6 to believe it. I did a double-take. Then again, maybe I shouldn’t take economists so seriously.